Stronger Oversight of FHA Lenders Could Reduce HUD's Insurance Risk
T-RCED-00-213: Published: Jun 29, 2000. Publicly Released: Jun 29, 2000.
Pursuant to a congressional request, GAO discussed the Department of Housing and Urban Development's (HUD) oversight of Federal Housing Administration (FHA) lenders.
GAO noted that: (1) GAO's work revealed a number of weaknesses in the lender approval, monitoring, and enforcement efforts performed by HUD's headquarters and its four homeownership centers; (2) HUD's process for granting FHA-approved lenders direct endorsement authority--that is, the ability to underwrite loans and determine their eligibility for FHA mortgage insurance without HUD's prior review--provides only limited assurance that lenders receiving this authority are qualified; (3) in addition, while HUD's homeownership centers have monitored lenders' compliance with FHA's lending requirements, these monitoring efforts have not adequately focused on the lenders and loans that pose the greatest insurance risks to the Department; and (4) although HUD has taken enforcement actions against lenders with excessively high default rates, it needs to take further steps to hold lenders accountable for poor performance and program violations.